Rapidly Rising Costs Forecast for Subway Equipment Upkeep

By Stephen J. LyntonBy Stephen J. LyntonMarch 12, 1986

The Metro transit system, currently threatened with sharp cuts in federal funds, will face soaring multimillion-dollar costs to overhaul and replace worn-out subway cars, tracks and equipment in the next 15 years, according to a federally financed study released yesterday.

The $300,000 report, issued by the Federal City Council, a nonprofit business and civic organization, said that these expenses will nearly quadruple from $41.8 million this year to $157.5 million in 2000 even if the forecasts are adjusted to omit the impact of inflation.

Metro's current renovation and replacement costs are financed mainly with federal funds. Under existing laws, however, Metro will not be entitled to additional federal aid to offset the increases. Local governments may have to provide these funds, officials said.

If the inflation rate is estimated at 3.5 to 5 percent annually, Metro's costs to renovate and replace outmoded equipment will skyrocket to $307.4 million a year in 2000, the report indicates.

"The Washington area will be faced with a large and increasing bill for capital rehabilitation and replacement in the very near future," concluded the study, which was put together in nine months.

Because of proposed cutbacks in federal aid for mass transit, officials said, it is unclear how local governments will finance these and other Metro costs. Proposals yesterday ranged from higher local subsidies and new taxes to congressional moves to overturn the Reagan administration's threatened cuts.

"It shows a major, major, major cost implication in the next seven years," said Ralph L. Stanley, the Reagan administration's mass transit chief.

Stanley warned that local governments may have to levy steep taxes or raise Metro subsidies to finance these expenses, along with Metro's rising operating deficits and multibillion-dollar shortages of construction funds. He suggested a 45-cent-a-gallon gasoline tax or 1.67 percent sales tax increase by 2000.

"The study shows that the region can afford Metrobus and Metrorail," countered Metro General Manager Carmen E. Turner. Metro and other local officials argued that the increasing costs can be financed with federal aid along with other revenue sources that include a proposed reserve fund relying on earnings from Metro's investments. The transit authority recently began a study of this issue.

The Federal City Council's report, largely financed by the Urban Mass Transportation Administration, the agency Stanley heads, was the first extensive study of Metro's long-term costs to renovate and replace rail cars, tracks, escalators, elevators and Farecard machines along with electric power, train control and communications equipment.

These costs are expected to rise as the subway sys- tem ages. Some equipment was purchased 10 years ago, when the system opened, and many items wear out or require overhauls in less than 30 years. Rail cars now cost $1.1 million each, and, officials said, funds must be set aside to replace them.

The study was compiled from data provided by Peat, Marwick, Mitchell & Co., the Greater Washington Research Center and the Metropolitan Washington Council of Governments. It offered the first long-range forecasts of Metro's operating deficits in five years.

In contrast to the rapidly rising renovation and replacement costs, the report said, the bus and subway system's deficits will climb moderately in the next 15 years. If the impact of inflation is omitted, the study found, Metro's deficit will rise from $211.6 million this year to $256.5 million in 2000, a 21.2 percent increase. If inflation is put at 3.5 to 5 percent a year, the deficit will reach $500.6 million in 2000, the report indicated.

Metro's deficits are financed by subsidies from city, county and state governments, which rely on real estate and other tax revenues. Because of expected growth in the Washington area in the next 15 years, the study said, local governments probably can absorb the increased costs of subsidizing Metro.

Metro currently is embroiled in a controversy over its plans to expand the rail system to 103 miles by the late 1990s.

The Reagan administration has proposed halting all federal spending for Metro construction after the current fiscal year, leaving Metro more than $2 billion short of its goal.

The study said that Metro's overall fiscal outlook depends heavily on the outcome of this dispute.

If federal cuts are severe, Metro's total annual costs -- including operating deficits, replacement expenses and construction spending -- will more than double from $272.4 million this year to $596.4 million in 1993, even if inflation is omitted, the report said.

Total costs will decline to $412 million in 2000 because the rail system is scheduled to be completed by then, according to the study.